General Equilibrium with Endogenous Trading Constraints

10 Pages Posted: 24 Apr 2014 Last revised: 4 Dec 2017

Sebastián Cea-Echenique

Paris School of Economics - University Paris 1

Juan Pablo Torres-Martínez

Department of Economics, University of Chile

Date Written: July 16, 2016

Abstract

In a competitive model where agents are subject to endogenous trading constraints, we make the access to financial trade dependent on prices and consumption decisions. Our framework is compatible with the existence of both credit market segmentation and market exclusion. In this context, we show equilibrium existence in two scenarios. In the first one, individuals can fully hedge the payments of segmented fi nancial contracts by trading unsegmented assets. In the second one, it is assumed that agents may compensate with increments in present demand the losses of well-being generated by reductions of future consumption.

Keywords: Incomplete Markets, General Equilibrium, Endogenous Trading Constraints

JEL Classification: D52, D54

Suggested Citation

Cea-Echenique, Sebastián and Torres-Martínez, Juan Pablo, General Equilibrium with Endogenous Trading Constraints (July 16, 2016). Available at SSRN: https://ssrn.com/abstract=2428354 or http://dx.doi.org/10.2139/ssrn.2428354

Sebastián Cea-Echenique

Paris School of Economics - University Paris 1 ( email )

Chile

Juan Pablo Torres-Martínez (Contact Author)

Department of Economics, University of Chile ( email )

HOME PAGE: http://www.econ.uchile.cl/es/academico/jutorres

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